Correlation Between Levi Strauss and Ermenegildo Zegna

Can any of the company-specific risk be diversified away by investing in both Levi Strauss and Ermenegildo Zegna at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Levi Strauss and Ermenegildo Zegna into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Levi Strauss Co and Ermenegildo Zegna NV, you can compare the effects of market volatilities on Levi Strauss and Ermenegildo Zegna and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Levi Strauss with a short position of Ermenegildo Zegna. Check out your portfolio center. Please also check ongoing floating volatility patterns of Levi Strauss and Ermenegildo Zegna.

Diversification Opportunities for Levi Strauss and Ermenegildo Zegna

0.84

Correlation Coefficient

Levi Strauss  Ermenegildo Zegna

Very poor diversification

The 3 months correlation between Levi and Ermenegildo is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Levi Strauss Co and Ermenegildo Zegna NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ermenegildo Zegna and Levi Strauss is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Levi Strauss Co are associated (or correlated) with Ermenegildo Zegna. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ermenegildo Zegna has no effect on the direction of Levi Strauss i.e., Levi Strauss and Ermenegildo Zegna go up and down completely randomly.

Pair Corralation between Levi Strauss and Ermenegildo Zegna

Given the investment horizon of 90 days Levi Strauss Co is expected to under-perform the Ermenegildo Zegna. But the stock apears to be less risky and, when comparing its historical volatility, Levi Strauss Co is 1.3 times less risky than Ermenegildo Zegna. The stock trades about -0.06 of its potential returns per unit of risk. The Ermenegildo Zegna NV is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  825.00  in Ermenegildo Zegna NV on December 29, 2024 and sell it today you would lose (57.00) from holding Ermenegildo Zegna NV or give up 6.91% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Levi Strauss Co  vs.  Ermenegildo Zegna NV

Levi Strauss

Risk-Adjusted Performance

Very Weak

Over the last 90 days Levi Strauss Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Ermenegildo Zegna

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ermenegildo Zegna NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Ermenegildo Zegna is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Levi Strauss and Ermenegildo Zegna

The main advantage of trading using opposite Levi Strauss and Ermenegildo Zegna positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Levi Strauss position performs unexpectedly, Ermenegildo Zegna can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Ermenegildo Zegna will offset losses from the drop in Ermenegildo Zegna's long position.

The idea behind Levi Strauss Co and Ermenegildo Zegna NV pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Bonds Directory module to find actively traded corporate debentures issued by US companies.